Producer Prices for Farming Products and Food Prices in Austria. Trends as Typified by Grain and Milk
In the summer of 2007, prices for grain and milk shot up both on the world market and within the EU's single market. The price hike surpassed those observed in 2001. Consequently, prices for food rose as well; their share in the general price increase was greater than in past years. These effects were triggered by a combination of several factors: strong economic growth and changing consumer habits in densely populated threshold countries as well as the increasing use of plants as energy sources together resulted in intensified demand. Apart from crop failures, the restraint exercised by agricultural politics with regard to direct market intervention and a reduction in government-financed stocks tightened up the supply. Such supply effects were the main cause for the sharp increase in global market prices for grain and milk in 2007. With grain used as feed, meat is expected to experience a price surge as well. Even though politics interferes less directly with the agricultural markets, it still has a range of measures at its disposal to boost supply and thereby curb prices. Such tools, however, are not effective in the short term but can be expected to impact in the second half of 2008 at the earliest.
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